The Eid homecoming season usually creates a consumption surge. The service sector, including transportation, hospitality, restaurants, and retailers, benefits the most from the Eid homecoming flow, with an estimated 12 million travelers this year. Not only large businesses but also micro, small, and medium enterprises (MSMEs), including street vendors, share in the benefits.
For instance, food and beverage vendors along the northern coastal route (pantura) and the southern route through Bandung usually profit from travelers using public buses or private vehicles such as cars and motorcycles.
However, part of the consumption share previously enjoyed by lower-tier businesses, such as street vendors, sate maranggi sellers, and roadside eateries along the homecoming routes, has shifted to restaurants like Wendy’s, McDonald’s, KFC, or Starbucks, which attract travelers’ spending at highway rest areas. These are global restaurant chain brands or franchises with worldwide business networks. In other words, business competition has become more open, directly placing MSMEs against global business networks.
This challenge is also faced by many MSMEs striving to penetrate the market and become part of the supply chain of large corporations. With limited business scale, MSMEs are already confronted with conglomerate blockades that develop their own vendor systems. This condition highlights the significant imbalance in market dominance within the business world, and if left to compete freely, many MSMEs may not survive. Another indicator of this market imbalance is access to funding. While medium and large entrepreneurs are pursued by banks offering credit, most MSMEs struggle to access bank loans.
If MSMEs lose out to large corporations, it is the natural course of the market. However, the state should play a role as a balancing agent when economic control in society and the business world remains unequal. Government policies supporting MSME financing, such as the Kredit Usaha Rakyat (KUR) program to expand financial access, are highly beneficial. If this year’s Rp120 trillion KUR disbursement target is met, millions of small entrepreneurs will receive low-cost capital support. With a credit guarantee scheme, where guarantees replace collateral, the banking industry can also be more involved in MSME empowerment through financing support, with risks absorbed by the guarantee industry.
Undeniably, MSMEs face challenges beyond capital. However, financial support can help them expand their businesses and achieve economies of scale to become more competitive in the market.
Other obstacles, such as management issues, licensing, information technology, branding, and market access, must also be addressed through MSME assistance programs, including training, marketing support, and promotion. Given the significant number of MSMEs and their substantial contribution to the economy, such as job creation, the government has a strong interest in their development.
Many other countries have also implemented measures to support MSMEs, such as reducing administrative burdens, developing e-government, promoting startups, easing licensing, improving financing, encouraging innovation, and expanding market access.
In conclusion, if MSMEs struggle to compete against conglomerates, they can either collaborate with them or innovate to create their own markets. Another crucial factor is public awareness and willingness to support MSME products and services. Often, consumers bargain for the lowest possible price from MSMEs, while readily accepting any price set by conglomerates.
Ultimately, the key is for MSMEs to be competitive and innovative in the market. Besides maintaining proper business documentation, MSMEs must keep financial records. The market dictates business success, and it is difficult to push large companies to collaborate with MSMEs if the latter cannot produce competitive products and services with high service standards. Therefore, MSMEs need training across all business aspects, particularly in financial reporting, to demonstrate their feasibility for funding and growth to the next level. (*)
The author is the President Director of Perum Jamkrindo.